Discharge of Debt Tag

30 Jun Are There Any Reasons NOT to File Chapter 7 Bankruptcy? Part 2-You May Not Discharge All Your Debt

Although Chapter 7 bankruptcy usually wipes the slate clean as far as most of your debts are concerned, there are some debts that may not be discharged. Certain debts, such as most taxes, child or spousal support, and student loans usually survive the Chapter 7 discharge. Debts incurred through fraud, may also survive the discharge. And in cases where the Chapter 7debtor has lied on his/her bankruptcy petition or meeting of creditors, or attempted to withhold assets, a creditor, the Chapter 7 Trustee, or the US Trustee could object to the entire discharge. Sales tax, withholding tax (or if a corporation owed the tax, you are only personally liable for the "trust fund" portion) and income taxes assessed less than 3 years prior to the bankruptcy filing are not dischargeable. Property taxes are dischargeable as to you, if you are giving up the property, but if you are keeping the property they will remain on the property.
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Questions about filing bankruptcy

15 Jun HELOC in bankruptcy: dischargeable?

Questions about filing bankruptcyRemember the Star Trek episode about tribbles, who multiplied like rabbits? In the world of filing for bankruptcy, it's bad information that seems to be spawned faster than we can refute it. A reader of my website, Bankruptcy in Brief, emailed me about conflicting input she was getting as she tried to file bankruptcy without a lawyer. Some HUD counselor told this 81 year old lady that if she was paying interest only on a HELOC, it was a dischargeable debt; if she was paying principal and interest, it was not dischargeable. Poppycock! The dischargeability of a debt has nothing to do with the terms of the loan. The borrower's personal liability for a home equity line of credit or a standard second position home mortgage is dischargable in bankruptcy. The discharge cuts off the rights of the lender against the borrower who has filed bankruptcy. Even if the home equity line is destroyed by a foreclosure, after a discharge, the HELOC lender cannot sue the borrower. The only issue about the scope of the discharge suggested by the question is the principle that properly perfected liens survive the bankruptcy. So my client's HELOC will remain a lien on her property after a Chapter 7 discharge; the lender cannot, however, sue her to collect any money on account of the HELOC. Its only rights are those against the collateral for the loan. In a Chapter 13, a second lien on property whose value is less than what's owed on senior liens can be voided. That's know as lien stripping, for short. The idea is that the lender really doesn't have a secured claim if there is no value in the collateral that is available to that lender, after providing for lenders whose liens were perfected earlier.
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20 Apr Student Loan Hangover – The Economy And Bankruptcy

Student Loans are a necessary evil for most individuals looking to pursue higher education.  They were for me, and as I look back, I didn't have to worry about the economy or a difficult job market after I dealt with the bar exam. Historically, when times get tough, many people go back to school, and they upgrade their skills or pursue a Bachelors or Masters Degree.  Normally, this is a very smart path to pursue.  However, it today's economic climate, the price of higher education may be too high, and the education may not be worth the price most people are willing to pay because of what I like to call the student loan hangover.  My student loan hangover lasted over 10 years.
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20 Apr Carpenter’s Apprentice Training Costs Non-Dischargeable as “Student Loans,” Even Though No Loans Were Made

In re Kesler, 2009 WL 650421 (Bky.S.D.Ill. March 9, 2009), held that $29,118.18 in carpenter's apprentice training costs were non-dischargeable as "educational loans" within the meaning of section 523(a)(8) of the bankruptcy law. The bankruptcy court rejected the debtor's argument that because no actual monetary loans were ever made to him, his obligation to pay for the apprenticeship training he had received was not a student loan. The debtor had received carpentry training from the Indiana/Kentucky Regional Council of Carpenters Joint Apprenticeship and Training Committee (JATC), a non-profit institution. He signed five separate agreements to repay the cost of his training through either on the job credits, or by paying immediately in cash if he obtained employment as a carpenter with an employer who was not a signatory to the JATC program. After the debtor began working for a non-signatory carpentry firm, the JATC sued the debtor, seeking payment for the costs of his apprenticeship. The JATC was awarded a judgment by an Indiana state court. The debtor made $1,800.00 in payments toward the judgment, then filed chapter 7 bankruptcy shortly afterward. The JATC asked the bankruptcy court to rule that the apprentice costs were non-dischargeable as educational loans.
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01 Apr Student Loans Discharged; Court Rules That Wife’s Income Not Relevant in Determining Income for “Undue Hardship” Analysis

A Minnesota bankruptcy court recently held that the income of a non-debtor wife should not be considered to increase the income of a chapter 7 debtor, for purposes of considering whether the husband's student loans should be discharged as constituting an "undue hardship." The court held that while the wife's income could be considered to the extent that her income reduced the husband's living expenses, her income should not be automatically added to the husband's income, in evaluating his monthly income and expenses. This case gives hope to chapter 7 debtors desiring to discharge burdensome student loans, whose personal income is meager, but who are married to spouses whose income substantially adds to their own. Income from spouses who are not responsible for the other spouses' student loans cannot always be used to defeat efforts to discharge student loans, under the reasoning of this decision. Halverson v. U.S. Department of Education, 2009 WL 396112 (Bky.D.Minn. Feb. 12, 2009), involved a 65-year-old married man who had accumulated nearly $300,000 in student loans. His after tax monthly income was $2,094.17; his wife's after tax monthly income was $2,589.81. Interest alone on his student loans amounted to $1,962.79 per month. The husband and his non-debtor wife had signed an antenuptial agreement and had been married several years prior to his chapter 7 filing.
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